Microwave energy based chemical synthesis has several merits and is important from both scientific and engineering standpoints. Microwaves have been applied in numerous inorganic and organic chemical syntheses; perhaps, from the time their ability to work as heat source was discovered. Recent laboratory scale microwave applications in biodiesel production proved the potential of the technology to achieve superior results over conventional techniques. Short reaction time, cleaner reaction products, and reduced separation-purification times are the key observations reported by many researchers. Energy utilization and specific energy requirements for microwave based biodiesel synthesis are reportedly better than conventional techniques. Microwaves can be very well utilized in feedstock preparation, extraction and transesterification stages of the biodiesel production process. Although microwave technology has advanced in other food, pharmaceutical and polymer chemistry related research and industry, it has yet to prove its potential in the biodiesel industry at large scale applications. This paper reviews principles and practices of microwave energy technology as applied in biodiesel feedstock preparation and processing. Analysis of laboratory scale studies, potential design and operation challenges for developing large scale biodiesel production systems are discussed in detail.